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March 2, 2007 8:23 pm

Investors block Sonaecom bid for PT

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Sonaecom’s €11.6bn ($15.3bn) bid for Portugal Telecom collapsed on Friday when PT shareholders rejected a proposal to abolish the group’s voting restrictions, making it impossible for its smaller rival to gain control.

The vote means Sonaecom, a Portuguese telecommunications and media group, can no longer pursue the offer for PT it launched a year ago in what was Portugal’s biggest takeover bid to date. “We will turn the page and look at other opportunities,” Sonaecom said on Friday night.

More than 46 per cent of PT shareholders at the extraordinary general meeting voted against a Sonaecom proposal to abolish a company statue limiting the voting rights of any single shareholder to 10 per cent.

Removing the voting limit, for which it would need the support of two-thirds of the shareholders present, was an essential condition for Sonaecom’s bid to proceed. The rejection of Sonaecom’s bid will fuel an already heated debate in Portugal over the use of voting restrictions to protect companies from takeover.

“Our offer could only have been successful if a majority of shareholders agreed to sell,” a Sonaecom representative said. “We wanted to remove the voting restriction to give them that opportunity in the marketplace.”

Carlos Tavares, head of the CMVM, Portugal’s stock market regulator, had publicly supported the abolition of PT’s voting restrictions to allow Sonaecom’s bid to be decided in the market.

Shareholders accounting for 67 per cent of PT’s capital were represented at the meeting. Just over 43 per cent voted in favour of abolishing the voting limits and 10 per cent abstained.

Before the vote, Sonaecom requested the suspension of the meeting until March 8. But its request was rejected by the chairman of the meeting. Sonaecom said it wanted a court to consider the legality of PT’s alleged use of its own shares to vote. It also wanted to provide more time for shareholders to register their participation.

Before the meeting, Paulo Azevedo, Sonaecom’s chief executive, told a Portuguese radio station that an active partnership with Vodafone’s Portuguese operations was a possible option if the bid for PT failed. But he did not envisage a merger. He also said Sonaecom might consider a second bid for PT if its share price was attractive in 12 months, the earliest Sonaecom could launch another bid for the group.

Shares in Sonaecom fell 14 per cent to €5.42 before the start of the meeting, when trading in all the companies involved in the bid was suspended. PT shares were down 1.6 per cent at €9.90.

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